Corporate debt has surged $1.3 trillion since the start of 2020
Not since Alan Greenspan’s time has the U.S. central bank tried to navigate the economy back to price stability from too-high inflation.
Powell’s challenge is to try to curb price pressures without large costs to employment or growth
“They are in a difficult position,” said Jeremy Stein, professor of economics at Harvard University and a Fed governor from 2012 to 2014. There’s just a tremendous amount of interest-rate sensitivity in markets.”
If the Fed follows recent practice and raises rates a quarter point at each meeting starting in mid-2022, it might add up to a 1.25% hike by the end of next year. If inflation does what I think it will do, that will still leave negative real interest rates of -3%, still extraordinarily accommodative. But would markets tolerate anything tougher? Probably not.
John Mauldin 10 December 2021
https://englundmacro.blogspot.com/2021/12/imagine-you-are-jerome-powell-in-early.html
“Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall,” the Fed said in its twice-yearly Financial Stability Report
https://englundmacro.blogspot.com/2021/11/fed-warns-risky-asset-prices.html
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